CHAPTER 7 NAME ___________________________________
TEN-MINUTE QUIZ SECTION _____________ DATE____________
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_____ 1. Long-term notes payable is an example of a(n):
a. Liability
b. Asset
c. Equity
d. Expense
_____ 2. Interest on a $1,000, six-month loan, at 8% would be:
a. $80
b. $40
c. $800
d. $160
_____ 3. Which of these accounts is not a definitely determinable liability?
a. Accounts payable
b. Warranty liabilities
c. Interest payable
d. Wages payable
_____ 4. Which of the statements below about payroll accounting is true?
a. Gross pay equals what the employee takes home.
b. Net pay = gross pay + deductions.
c. Deductions include federal income tax, FICA taxes, and other
withholdings.
d. Payroll liabilities are estimated liabilities.
_____ 5. Issuing bonds is an example of:
a. Equity financing
b. Revenue financing
c. Debt financing
d. None of the above
_____ 6. The amortization of bond premium by the issuer will:
a. Decrease interest expense
b. Increase interest expense
c. Have no effect on interest expense
d. Be equal to the amount of interest expense
_____ 7. If bonds are issued at a premium, the stated rate of interest will be:
a. Greater than the market rate of interest
b. Equal to the market rate of interest
c. Less than the market rate of interest
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 7-1
d. Unrelated to the market rate of interest
_____ 8. If bonds are issued at a discount, the bonds will sell for an amount:
a. More than face amount
b. Equal to face amount
c. Less than face amount
d. To be determined by the Securities and Exchange Commission
_____ 9. Company A has a debt-to-equity ratio of 20% and Company B has a
debt-to-equity ratio of 40%. Which of the following statements is true?
a. Company A has more debt than Company B.
b. Company B is more highly leveraged than Company A.
c. Company B has more debt than Company A.
d. Company B is more profitable than Company A.
_____ 10. In order to obtain positive financial leverage:
a. The benefit of borrowing money must exceed the cost of borrowing
money
b. A company must have a debt-to-equity ratio greater than 50%
c. A company must issue bonds
d. All of the above
ANSWER KEY – CHAPTER 7 – TEN-MINUTE QUIZ
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 7-2
Copyright © 2011 Pearson Education, Inc. publishing as Prentice Hall 7-3